Macroeconomics
13th Edition
ISBN: 9780134744452
Author: PARKIN, Michael
Publisher: Pearson,
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Question
Chapter 14, Problem 16APA
To determine
Determine the harmony among the Fed’s mandated policy goals.
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Students have asked these similar questions
The Fed's monetary policy strategy that focuses on achieving price stability is known as:
A.
Money supply management
B.
Inflation targeting
C.
Tax policy
D.
Currency exchange
What short-run tradeoff does the Fed face when it tries to achieve its dual mandate? The Fed faces a tradeoff between
A. the money growth rate and real GDP growth rate
B. the inflation rate and unemployment rate
C. keeping prices stable and moderating interest rates
D. changing tax revenues and balancing the government’s budget
The FED is facing a problem of unemployment. What policy should be used? How would each of the tools at the FED's disposal be used?
Chapter 14 Solutions
Macroeconomics
Ch. 14.1 - Prob. 1RQCh. 14.1 - Prob. 2RQCh. 14.1 - Prob. 3RQCh. 14.1 - Prob. 4RQCh. 14.2 - Prob. 1RQCh. 14.2 - Prob. 2RQCh. 14.2 - Prob. 3RQCh. 14.3 - Prob. 1RQCh. 14.3 - Prob. 2RQCh. 14.3 - Prob. 3RQ
Ch. 14.3 - Prob. 4RQCh. 14.4 - Prob. 1RQCh. 14.4 - Prob. 2RQCh. 14.4 - Prob. 3RQCh. 14.4 - Prob. 4RQCh. 14.4 - Prob. 5RQCh. 14 - Prob. 1SPACh. 14 - Prob. 2SPACh. 14 - Prob. 3SPACh. 14 - Prob. 4SPACh. 14 - Prob. 5SPACh. 14 - Prob. 6SPACh. 14 - Prob. 7SPACh. 14 - Prob. 8SPACh. 14 - Prob. 9SPACh. 14 - Prob. 10SPACh. 14 - Prob. 11SPACh. 14 - Prob. 12SPACh. 14 - Prob. 13SPACh. 14 - Prob. 14SPACh. 14 - Prob. 15SPACh. 14 - Prob. 16APACh. 14 - Prob. 17APACh. 14 - Prob. 18APACh. 14 - Prob. 19APACh. 14 - Prob. 20APACh. 14 - Prob. 21APACh. 14 - Prob. 22APACh. 14 - Prob. 23APACh. 14 - Prob. 24APACh. 14 - Prob. 25APACh. 14 - Prob. 26APACh. 14 - Prob. 27APACh. 14 - Prob. 28APACh. 14 - Prob. 29APACh. 14 - Prob. 30APACh. 14 - Prob. 31APACh. 14 - Prob. 32APACh. 14 - Prob. 33APACh. 14 - Prob. 34APACh. 14 - Prob. 35APACh. 14 - Prob. 36APACh. 14 - Prob. 37APACh. 14 - Prob. 38APACh. 14 - Prob. 39APACh. 14 - Prob. 40APACh. 14 - Prob. 41APA
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- 1) when the fed realises that inflation is going up at an unstable rate for the economy , which of the following are they most likely do ? (a) print more money (b) increase the discount rate (c) lover the reserve ratioarrow_forwardContractionary Monetary Policy Assume that the economy is currently in short run equilibrium but experiencing an inflationary gap. Graphically illustrate the problem Identify the combination of monetary policies that the Federal Reserve would pursue to correct problem Graphically illustrate and explain how these monetary policies affect (1) the Market for Reserves, (2) the Market for M1, and (3) the Market for Real Goods and Services (AD-AS) Make sure that you identify the Fed’s goals/objectives and also graphically illustrate the solution.arrow_forward2) Explain and show graphically: a) What would you expect to happen to the money demand curve during the Christmas season? b) With no Fed intervention, what would happen to the interest rates. c) In fact, interest rates do not change around Christmas due to Fed policy. How does the Fed ensure interest rates remain stable during Christmas?arrow_forward
- The Fed's mandated goals are "maximum employment, stable prices, and moderate long-term interest rates." Explain the harmony among these goals in the long run. In the long run, ________. A. increases in monetary aggregates create a positive output gap and price stability, maximum employment, and close-to-zero nominal interest rates B. low nominal interest rates bring maximum employment, stable prices, and eliminate structural unemployment C. price stability brings maximum sustainable potential GDP growth, maximum employment, and a nominal interest rate close to the real interest rate D. price stability brings maximum sustainable potential GDP growth, unemployment below the natural rate, and nominal interest rates that rise slowlyarrow_forwardINTEREST RATE (Percent) 4. The effect of monetary policy on aggregate demand Suppose the Federal Reserve ("the Fed") shifts to a contractionary monetary policy by selling bonds through open-market operations. Assume that this policy is unanticipated. This problem will work through the short-run effects of this move. The following graph shows the money demand and money supply curves. Show the effect of the Fed's contractionary monetary policy by shifting one or both of the curves, and ignore any potential feedback effects. As a result of the Fed's policy, the interest rate to INTEREST RATE (Percent) 0 ° 300 600 Money Supply Money Demand -0- Money Supply 900 1200 Money Demand 1500 1800 QUANTITY OF MONEY (Billions of dollars) The following graph shows the demand for investment. Show the short-run effect of the Fed's contractionary monetary policy by shifting the curve or moving the point along the curve. Again, ignore any potential feedback effects. Be sure the new interest rate…arrow_forwardExplain the linkages in the causal chain when the Fed conducts a contractionary monetary policy. Explain how the FED would use the THREE tools available for Monetary policy. Make sure you include all 5 steps outlined below. 1)List the three tools and how specifically they would change. 2)How the actions stated above would effect the money supply. 3) How this change in the money supply will effect the interest rate. 4) How #3 will effect the rate of investment. 5) How this will effect real GDP/AD Remember, this is an essay question. Write in complete sentences. Take the time to proof-read for clarity.arrow_forward
- Describe the open market operation of the Fed. What open market actions would the Fed take to expand the economy? Explain the mechanics of how this happens.arrow_forwardThe Fed believes if inflation is high and GDP is high, unemployment is likely to: a. Increase b. Decrease c. Remain the same d. Invertarrow_forwardIf the Fed opts to employ open market operations to increase the money supply, then a.The Fed will have to compensate for this change by increasing the discount rate b.Bond rates will increase because the Fed must buy Treasury bonds from individuals in the market, and this will cause the demand for these bonds to increase c.Banks will petition the Fed to increase the federal funds rate to recoup their losses d.Government budget surpluses will be more likely to achieve e.Bank reserves will decrease as consumers withdraw funds to purchase more Treasury Bonds and this will have an effect on the money supply via the money multiplierarrow_forward
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